Correlation Between Royal Canadian and National Bank

Can any of the company-specific risk be diversified away by investing in both Royal Canadian and National Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Royal Canadian and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royal Canadian Mint and National Bank of, you can compare the effects of market volatilities on Royal Canadian and National Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Royal Canadian with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Canadian and National Bank.

Diversification Opportunities for Royal Canadian and National Bank

0.49

Correlation Coefficient

Royal Canadian  National Bank

Very weak diversification

The 3 months correlation between Royal and National is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Royal Canadian Mint and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank and Royal Canadian is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Royal Canadian Mint are associated (or correlated) with National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Royal Canadian i.e., Royal Canadian and National Bank go up and down completely randomly.

Pair Corralation between Royal Canadian and National Bank

Assuming the 90 days trading horizon Royal Canadian is expected to generate 1.41 times less return on investment than National Bank. In addition to that, Royal Canadian is 1.74 times more volatile than National Bank of. It trades about 0.09 of its total potential returns per unit of risk. National Bank of is currently generating about 0.22 per unit of volatility. If you would invest  2,308  in National Bank of on October 7, 2024 and sell it today you would earn a total of  212.00  from holding National Bank of or generate 9.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Royal Canadian Mint  vs.  National Bank of

Royal Canadian Mint

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Canadian Mint are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Royal Canadian may actually be approaching a critical reversion point that can send shares even higher in February 2025.

National Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, National Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Royal Canadian and National Bank

The main advantage of trading using opposite Royal Canadian and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Canadian position performs unexpectedly, National Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in National Bank will offset losses from the drop in National Bank's long position.

The idea behind Royal Canadian Mint and National Bank of pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.